2.1- Growing the business Flashcards
Business growth
Process of a firm getting bigger
2 general types of expansion
Internal/organic
External/inorganic
Internal/organic ways to expand
-Entering new markets
-New locations
-Innovation: new products
-Technology: better machinery
External/inorganic ways to expand
and definitions of them
Merger- two companies combine to one organisation
Takeover- one company taking control of another
4 ways to see growth
Increase in sales/revenue
Increase no. of employees
Increase in outlets/locations
Increase in market share
Benefits of innovation
Increase product range–>appeal to larger audience–> more revenue–>higher market share
Benefits of entering new markets
Increase brand recognition–> higher global sales–> increase market dominance
Benefits of new locations
More outlets–> increase customer convenience–> competitive ad–> customer loyalty
Benefit of technology
More machinery–> increase productive capacity–> meet rising demand–> increase profit
Advantages of organic growth
Less risk than external growth
Can be financed internally (retained profit)
Grows at sensible rate
Disadvantages of organic growth
Dependant on overall market growth
Hard to increase market share if a leader alr
Slow growth, shareholders may prefer it to be rapid
Advantages of inorganic growth
Higher revenue/ sales/ market share
Lower risk of failure
Global expansion
Disadvantages of inorganic growth
Clash of cultures/ management styles
Poor communication as it grows
Differing objectives
PLC is?
4 key features
Public limited company
Largest type of business ownership
Listed on stock exchange
Anyone can buy shares
Shareholders have limited liability
Advantages of PLC
Able to raise additional finance
Limited liability
Seen as more prestigious/reliable due to info available to public
Disadvantages of PLC
More complex procedures
Risk of hostile takeovers
Increased media attention
MNC is?
M definition?
Multinational corporation
Multinational- a business with operations in more than one country
Advantages of MNC and analysis
Wider target market–> more consumers–> better sales–> better business success
Use cheap labour abroad–> in developing countries–> lower production costs–> capital spent elsewhere
Avoid protectionism–> could avoid restrictions on imports
Disadvantages of MNC
Less focus on specific markets
Cultural and language differences
2 types of internal finance
Selling assets, retained profit
3 types of external finance
Share capital, loan capital, on stock exchange
Selling assets
Ads & dis
Ad- helps business grow, raises finance
Dis- fewer assets could make it harder to borrow from banks
Retained profits
Ads & dis
Ad- No interest
Dis- limited amount
Issuing shares
Ads & dis
Ad- no interest
Dis- take share of profits
Stock exchange
Ads & dis
Ad- quick and cheap
Dis- open to takeover
How business aims and objectives change in response to technology?
Improving tech, innovation, aim to improve product range, minimise production costs
How business aims and objectives change in response to market conditions?
Growing market, aims focusing on growth
Market w increasing competition, aim to survive
How business aims and objectives change in response to performance?
Look at places to improve
Poor financial performance in previous year, aim to improve sales or revenue
How business aims and objectives change in response to legislation?
Change in legislation, could increase costs, adapt aims to counteract this increase
How business aims and objectives change in response to internal reasons?
Strategic decisions within a company e.g deciding to sell in another country, aim focusing on entering a new market
International trade
Flow of goods and services between countries e.g. importing and exporting
Import
A good brought into the country (money leaving UK)
Export
A good sold to another country (money coming into UK)
Globalisation
Increasing number of businesses that are operating on a national scale
Benefits to a UK business of globalistion
-Greater number of customers to sell to in a new market
-Lower cost of production in developing countries
Drawbacks to a UK business of globalisation
-Threat from foreign businesses
-Adapting products to meet foreign customer needs
Barriers to international trade def?
A government imposing regulations to restrict flow of international products in its country
3 main barriers to international trade
2 reasons for them?
Tariffs
Quotas
Export subsidy
-Protect jobs in domestic industries
-Increase tax revenue from tariffs
Tariff
Def?
Ads?
Dis?
Tax placed on an import to increase its price and decrease its demand
Ads- more money for domestic gov; businesses in domestic country have less competition
Dis- imported goods and services become more expensive; other countries may impose tariffs, affecting exports
Trade blocs def?
Group of countries who make a trade agreement not to place tariffs
Free trade def?
No restrictions to buying and selling between countries
Benefits of using e-commerce to trade internationally
-Can translate websites, reach new geographical markets, sell in more countries
-Don’t need physical presence in the country, lowers start up costs
Glocalisation
Adapting products to meet countries’ cultural differences
Ethics
Moral principles that guide the way a business behaves
Being ethical
Ads?
Dis?
-Higher rev, increased customer purchases based on ethics
-Easier to attract staff
*Increased overhead costs, like training
*Bad publicity if found to be unethical
Trade-off
Finding a balance between achieving two objectives
Marketing mix with being ethical
Product- more sustainable
Price- increases price paid to small suppliers
Place- sold close to production, less CO2
Promo- Accurate info on packaging
Impacts of air, noise and plastic pollution from a business
-Businesses offering delivery increases traffic congestion
-Can negatively affect health
-Can damage ecosystems
